Malaysia sees possible contraction in growth

Bloomberg

Malaysia’s economy could contract this year as the country struggles with a month-long coronavirus lockdown and a steep fall in commodity prices.
Gross domestic product could shrink as much as 2% this year or grow as much as 0.5%, Malaysia’s central bank said in its annual Economic and Monetary Review.
The global pandemic has hit the country’s tourism sector hard and is set to dampen private consumption and investment, Bank Negara Malaysia (BNM) said in the report, while volatile crude-oil prices will affect the country’s revenues.
“We are mindful that the situation surrounding Covid-19 is highly fluid and the situation is constantly shifting,” Governor Nor Shamsiah Mohd Yunus told reporters in a briefing, describing the revised outlook as the bank’s “best estimate” at this time. “Great uncertainty remains.”
The looming contraction comes as Malaysia’s neighbours also are seeing this year’s growth expectations wiped out. Singapore says GDP could shrink by as much as 4% this year, while Thailand’s central bank expects the economy to contract 5.3%.
Indonesia, while still forecasting some growth, warned that a contraction isn’t out of the question.
BNM last month cut its policy rate 25 basis points to 2.50% and slashed banks’ reserve requirement ratio by 100 basis points to 2% to bolster the economy amid the downturn.
The government also has announced a series of stimulus measures amounting to 250 billion ringgit ($58 billion), including cash handouts and six-month bank loan deferrals.
The central bank expects domestic growth to pick up toward the end of the year and normalise in 2021, supported by a recovery in global demand and continued policy measures.
The forecast also envisions renewed growth in export-oriented sectors, improved consumer sentiment and a revival of tourism. The stimulus measures should add 2.8 percentage points to growth this year, Nor Shamsiah said.